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2021 (7) TMI 656 - AT - Income TaxTP Adjustment - Comparable selection - Bharat Earth Movers Limited - HELD THAT:- Authorities below were not justified in including BEML in the list of comparables. We, therefore, direct to exclude it from the final tally of comparables. JCB India Limited - We uphold the inclusion of JCB India Limited in the list of comparables. At the same time, the TPO is directed to carry out reasonably accurate adjustment to the profit of JCB India Ltd. so as to eliminate the effect of a microscopic difference due to Trading sales and service income. Needless to say, the assessee will be allowed an opportunity of hearing. Incorrect methodology for computing capacity utilization adjustment - Both the sides are in agreement that the facts and circumstances of this ground are mutatis mutandis similar to those of the preceding years where this issue came up for consideration before the Tribunal. In its order for the A.Y. 2010-11, the Tribunal dealt with the capacity utilization adjustment raised through ground No.4 and decided through para 7 of its order restoring the matter to the file of AO to be dealt with in accordance with its order for the immediately preceding assessment year viz., A.Y. 2009-10. Respectfully following the Tribunal orders in the assessee‘s own case for immediately preceding two years, we set aside the impugned order on this count and remit the matter to the file of AO/TPO for re-computing working capital adjustment in consonance with the methodology provided by the Tribunal in its order for the earlier years. Adjustment towards voluntary transfer pricing addition offered by the assessee in the computation of total income - We direct the TPO to allow necessary relief qua the suo motu transfer pricing adjustment offered by the assessee, if the resultant transfer pricing addition turns out to be more than that. PLI determination - Direction given by DRP for taking 0.52% as PLI of the assessee, when correct PLI of the assessee, after considering Foreign Exchange (Net) and written back of Excess Provision for doubtful debts as non-operating income, came to 0.2212% - HELD THAT:- While finalizing the transfer pricing order, the TPO adopted margin of assessee from this segment at (-) 0.22% without providing computation for the same. It has also been mentioned in the same para that the assessee filed a rectification application before the TPO. In this backdrop of the facts, the DRP accepted the contention of assessee and accordingly directed the TPO to take assessee‘s PLI at 0.52%. As observed that the assessee filed a rectification application on this score way back on 13.02.2015. A copy of such an application has been placed. Despite such application, the ld. AR stated that the TPO has not passed any rectification order for a period of more than six years. The ld. DR also could not place on record any rectification order having passed by the TPO on this issue. In such circumstances, we are of the considered opinion that the DRP was fully justified in directing the TPO to consider assessee‘s margin at 0.52% as against (-) 0.22% adopted by the TPO in his order. Direction of the DRP to compute transfer pricing adjustment on proportionate basis - HELD THAT:- This issue is fairly settled by a judgment of the Hon‘ble jurisdictional High court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd. . [2017 (6) TMI 1240 - BOMBAY HIGH COURT] holding that the transfer pricing adjustment made at entity level should be restricted to the international transactions only. It is pertinent to mention that the Department‘s SLP against this judgment has since been dismissed by the Hon‘ble Supreme Court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd. [2018 (7) TMI 798 - SC ORDER]. Similar view has been espoused by the Hon‘ble Bombay High Court in CIT Vs. Thyssen Krupp Industries Pvt. Ltd [2016 (4) TMI 88 - BOMBAY HIGH COURT] and CIT Vs. Tara Jewels Exports (P). Ltd. [2015 (12) TMI 1130 - BOMBAY HIGH COURT]. We, ergo, direct to restrict the transfer pricing addition only to the extent of international transactions in this segment. TP addition made in the impugned order is set aside and the matter is restored to the file of the AO/TPO for re-computing the transfer pricing adjustment in the Manufacturing activity segment.
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